Haldia Coke and Chemicals Ltd, a group company of Ennore Coke, a Chennai-based met coke and power producer, is planning to raise Rs 125 crore through private equity. The money will be used to buy a 90 per cent stake in an Australian mining and to expand its facilities at Haldia and Orissa, according to a senior company official.
The official added that the company plans to buy a 90 per cent stake in an Australian mining firm Broughton for an estimated cost of around $15 million (around Rs 72 crore).
The target company has reserves of 30 million tonnes of coking coal. The company expects to complete the acquisition by mid-June 2010. "Presently, logistics’ due diligence is on. Once it is over we will complete the acquisition."
"A major advantage would be that the company can control the cost," said the official. He noted that in the last one year coal prices rose $60 which resulted in an increase of $90 in the price of coke. "For customers, it is not a small money, I have to confirm the pricing. The customer is ready to take up the variant in freight, which is little but not an abnormal increase in end-product pricing." The proposed acquisition will help the company control the variant and the company can determine the cost, he added.
The mine would supply 1 million tonne of coal, while the present requirements of the company is .72 million tonne only. Presently, the company imports 300,000 tonnes of coal from the US and 400,000 from Australia, and "now we don’t have to relay on the third party," said the official.
Commenting on the expansion plans, he said, the company is planning to double capacity at its Haldia and Orissa plants to 260,000 tonnes and 160,000 tonnes respectively. In Haldia, the company is planning to increase power generation capacity to 24 mega watt from 12 mega watt and in Orissa it is planning to set up a new power plant with a capacity of 8 Mw.
"Land has been allotted by Haldia administration and the expansion would start next year," he added.
"We are in talks with PE funds to raise around Rs 125 crore to fund the acquisition and expansion. The money will be raised through Haldia Coke, and presently due diligence is going on and the process would be completed in 5-6 months." The company is yet to decide what stake would be diluted, and it will be based on the result, according to the official.